Contrary to popular opinion, it's still possible to obtain a preliminary injunction in a patent case – it's just very difficult. Astrazeneca v. Apotex provides an example of an affirmed preliminary injunction, and is significant for that reason alone. It also raises some interesting inducement issues relating to intent that I'll discuss in a separate post.

BackgroundThis case revolved around AstraZeneca's budesonide inhalation suspension drug product, which consists of a vial containing a single dose of budesonide suspended in a sterile liquid. The drug is administered by squeezing the entire contents of the vial into a jet neubulizer, then inhaling the resulting mist through a mask attached to the nebulizer. Because budesonide is an inhaled corticosteroid, the FDA requires that the label include a warning instructing patients to "titrate down" to the lowest effective dose of the medication to avoid any adverse effects from excessive use of the medication.

The two patents at issue, Nos. 6,598,603 and 6,899,099, both contain method claims covering the once-daily use of the nebulized dose of a budesonide composition and product claims covering AstraZeneca's drug product kit.

Apotex sought approval to market a generic version of AstraZeneca's drug product. As an ANDA applicant, it was well aware of AstraZeneca's patents, and sought to avoid the once-daily method claims by removing any mention of once-daily dosing from its labels. While it succeeded in part, the FDA nevertheless required Apotex to keep the titration warning language in the generic product's label.

During the preliminary injunction proceedings, Apotex raised two principal arguments in response to the method claims. First, it contended that they were anticipated; second, it contended that its distribution of the generic version of the drug would not induce infringement of AstraZeneca's method claims. The district court rejected Apotex's arguments, and granted a preliminary injunction enjoining Apotex from marketing its product.

Note: The district court agreed with Apotex that the kit claims were invalid. On appeal, the panel affirmed that determination.

AnticipationApotex's first anticipation argument, involving a prior art patent, turned on a question of claim construction: whether the term "budesonide composition" encompassed budesonide encapsulated in liposomes (the '603 patent teaches dispersing budesonide in a solvent, either as a solution or a suspension that may include liposomes as an excipient). The majority agreed with AstraZeneca's position, focusing on the discussion contained within the specification and buttressing its conclusions with extrinsic evidence (in this case, expert testimony). Judge Bryson, dissenting on this point, reached the opposite conclusion: the claim term is not limited to budesonide directly dispresed in solvent, and thus the method claims are anticipated.

Apotex's also argued that a prior art British advertisement for AstraZeneca's product describing it as a twice-daily product anticipated the patents. The majority again agreed with AstraZeneca that this reference did not anticipate the once-daily method claims, both because it did not disclose once daily dosing and because it was not enabled with respect to that type of dosing. (Obviousness was apparently not in dispute, as at the time of the earlier reference no one recognized that the product could be administered once per day and still be effective). Judge Bryson again disagreed, reading the prior art advertisement to suggest the administration of the drug once a day.

Inducement of InfringementIn challenging the district court's finding of inducement of infringement, Apotex focused on the subject of intent, arguing that its instructions did not demonstrate intent to cause the users of its product to engage in once-daily dosing and that it lacked specific intent to cause infringement of Apotex's patent. The Federal Circuit rejected these arguments, affirming the district court's conclusion that the downward-titration instructions would necessarily result in some users engaging in once-daily dosing and noting that Apotex was well aware of the infringement problems raised by once-daily dosing, yet chose to proceed nonetheless.

Preliminary Injunction "Substantial Question of Invalidity" StandardAlthough not playing a major role in the ultimate outcome of this appeal, the court's articulation of the "likelihood of success" standard, along with the subsidiary "substantial question of invalidity" element, is noteworthy given the divergent views on this subject, such as those expressed by Judges Newman and Gajarsa in Abbott Laboratories v. Sandoz, 544 F.3d 1341 (Fed. Cir. 2008). AstraZeneca v. Apotex follows the approach of requiring a seemingly high threshold for patentees/low threshold for defendants on this issue:

For a patentee to establish that it is likely to succeed on the merits, it “must demonstrate that it will likely prove infringement of one or more claims of the patents-in-suit, and that at least one of those same allegedly infringed claims will also likely withstand the validity challenges presented by the accused infringer.” Ama-zon.com, 239 F.3d at 1351. When reviewing the grant of a preliminary injunction, this court “views the matter in light of the burdens and presumptions that will inhere at trial.” Titan Tire Corp., 566 F.3d at 1376 (citation omitted). A preliminary injunction should not issue if an alleged infringer raises a substantial question regarding either infringement or validity, i.e., the alleged infringer asserts an infringement or invalidity defense that the patentee has not shown lacks substantial merit. Genentech, Inc. v. Novo Nordisk A/S, 108 F.3d 1361, 1364 (Fed. Cir. 1997).

In Sun Pharmaceutical, a Federal Circuit panel affirmed a district court determination that Eli Lilly's patent for a method of using gemcitabine to treat cancer was invalid due for obviousness-type double patenting based on another application, filed the same day, claiming the compound gemcitabine and disclosing its use for treating cancer. (The previous Patently-O write-up is here). This morning the Federal Circuit issued an order denying Eli Lilly's petition for rehearing and rehearing en banc. The court was closely split on the latter, with four of the nine currently sitting judges dissenting on the decision not to rehear the decision en banc.

The dissent's principal concern was that, in its view, the panel opinion involved a departure from precedent, thus creating an intra-circuit split. According to the dissent,

the panel held the claims to the anticancer use to be invalid for double patenting because the anticancer use was mentioned (but not claimed) in the continuation-in-part specification that is not prior art, stating that “[t]he asserted claims of the later ’826 patent simply claim the anticancer use disclosed in the specification of the ’614 patent,” reported at 611 F.3d at 1389.

The dissent pointed out that this approach, which focused on the disclosure of the simultaneously filed patent, not its claims, was contrary to precedent:

Uniformly, unlike examination for obviousness based on prior art, the issue of obviousness-type double patenting is directed to whether the invention claimed in a later patent is an obvious variant of the invention claimed in an earlier patent. The panel opinion violates a vast body of precedent.

Furthermore, according to the dissent, expanding the doctrine of obviousness-type double patenting to the facts of this case serves no good policy purpose and creates a schism in the law – a schism that should be addressed by the court en banc:

A change of law “in ways that negatively impact the patentability of important later-discovered uses” serves no public purpose in areas in which commercial development requires patent protection. Id. If the majority of the court now believes, as a matter of policy, that the law should be changed in this new direction, en banc treatment is particu-larly appropriate, for the court’s rule is that the earlier precedent prevails unless overruled en banc. A situation in which the court ignores this rule, and applies whatever law the panel prefers, is an indictment of the ability of this court to provide stable law in the areas entrusted to us.

Comment: Given that there are currently only nine sitting Federal Circuit judges, it seems unlikely that the court will grant a rehearing en banc absent extraordinary circumstances – especially in cases where the panel decision was unanimous. In that situation, in order for an appeal to be reheard en banc, at least five of the six judges who did not participate on the panel would need to vote to rehear the decision en banc. Of course, there are instances when this would not apply, as senior judges and visiting judges frequently participate in panel determinations, but it is something to keep in mind for the near future.

The conventional approach to the fault elements1 of indirect and willful infringement is to speak of them in mens rea (or state of mind, if you prefer) terms. But describing fault this way is largely nonsensical when dealing with modern indirect and willful infringement. In my current work-in-progress, I suggest that the fault element of these doctrines should instead be conceived of as an objective inquiry that focuses on the degree of risk of infringement to a person in the accused party’s shoes. Given the Supreme Court's grant of certiorari this morning in Global-Tech v SEB, questioning whether we should even be talking about the issue in mental state terms seems particularly timely.

Inducement of infringement is the poster child for the problems associated with viewing the fault elements for certain doctrines in mens rea terms. For years, both the Federal Circuit and scholars struggled to define the state of mind necessary for inducement. Did it require intent to infringe a patent, or just intent to cause the underlying acts that constituted infringement? Even after the court settled this issue in DSU Medical, it continued to conceive of the requirement in mental state terms – in i4i v Microsoft, for example, the court stated that inducement requires that the accused party “knowingly induced infringement and possessed specific intent to encourage another’s infringement.” 598 F.3d 831, 851 (Fed. Cir. 2010). And perhaps the strongest evidence of how deeply this view is entrenched is the Court’s Question Presented in SEB, which assumes that the fault element must be described in mental state terms – asking whether the accused infringer must possess a certain “state of mind,” be it one of deliberate indifference or purposeful conduct.

In my paper, I offer several reasons why viewing the fault element of inducement in mental state terms is wrong. Among them are the following:

The “people” who are accused of inducement are not people at all. They are corporations. To speak of a corporation as having a specific state of mind is borderline meaningless. Is it sufficient that an engineer’s purpose is to infringe a patent? Or does one look to the legal department? Or must senior management “intend” to infringe a patent? These questions are particularly problematic in the patent infringement context, which involves assessments not just of factual consequences, but also of legal questions.

No one ever has the “purpose” of infringing a patent. Of course, one may purposefully engage in acts that constitute infringement. One may even purposefully copy another’s technology. But no one’s purpose is to infringe a patent.

Nor does the alternate mens rea concept of “knowledge” work. Knowledge is typically established when one is “substantially certain” of certain consequences. Given the uncertainties associated with patent law, one can virtually never be “substantially certain” that conduct infringes a patent short of a final judgment.

Indeed, the facts of past opinions involving inducement suggest that, notwithstanding the court’s framing of the legal issue, what is really required is the existence of an obvious, high risk that the relevant conduct infringes a particular patent – not actual knowledge that it infringes a patent or purpose to infringe a patent. Thus, although the fault element of inducement is commonly articulated as requiring “intent to infringe a patent,” I suggest that the normative standard that is actually being applied is one of recklessness.

Rather than continue to attempt to articulate the fault element of inducement as if it required a subjective mental state, I suggest that an objective inquiry akin to civil recklessness is more appropriate. Specifically, I argue that the better approach would be to ask whether, given the information known to the accused party at the relevant time, a high risk that the relevant conduct infringed a patent would be obvious to a person in the accused party’s place. Obviously, my articulation is by no means perfect (and I’m dealing with some of the imperfections in my paper), but I think it provides a more intelligible articulation of the fault element for inducement than currently exists.

1 By "fault element," I simply mean the component that transforms a doctrine into something other than a strict liability claim.

Yesterday, I discussed our conclusion that the Federal Circuit applies a stricter standard than the lower tribunals it reviews and that this preference for patentee success manifests through the intent to deceive component of the inequitable conduct analysis. In this post, I raise some broad ideas about inequitable conduct jurisprudence. The paper raises others as well, but the ones that follow offer a good perspective into what we believe may be going on.

The first idea is that the Federal Circuit might be applying a standard for intent to deceive that is higher than that required by its own caselaw. In other words, the Federal Circuit’s articulated standard – intent greater than gross negligence – might be lower then the court’s normative perspectives on inequitable conduct. At least some circuit judges might be applying a requirement more akin to knowledge or purpose. This idea finds some support in the empirical evidence. Our data indicate that patentee win rates can vary dramatically (from 40% to 100%) depending on the judge authoring the opinion, as the below graph of 14 judges who sat on the bench during the past decade illustrates.

Following closely from this first idea, and also suggested by the Figure, is the notion that when it comes to inequitable conduct the Federal Circuit might be having trouble communicating its standard – particularly with respect to intent – because it is not speaking with one voice. If the mental state standard applied at the appellate level differs between judges, lower tribunals might have a difficult time “locking on” to the Federal Circuit’s standard. This problem could be amplified by the fact that, as we have shown, the Federal Circuit does not seem to have balancing jurisprudence, which theoretically would address mental state standards above the threshold. Thus, rather than having a single standard for intent to deceive that is further refined through the balancing inquiry, Federal Circuit jurisprudence might have at least two distinct (and somewhat bipolar) mental state requirements, one higher than the other. This state of affairs might produce jurisprudential variation (and perhaps confusion among district courts), and might concentrate (as we have observed) inequitable conduct’s focus on intent to deceive.

Another idea the paper raises is that uncertainty around the standard might reflect jurisprudential design (albeit, probably unintentional jurisprudential design). For example, perhaps the Federal Circuit believes inequitable conduct doctrine is necessary to protect the integrity of the patent system, but is strongly biased against successful (for the patent challenger) inequitable conduct claims. Thus, the court might desire to maintain the threat of inequitable conduct so as to encourage patent applicants to take appropriate care in dealing with the public. Yet allowing too many findings of inequitable conduct might be equally bad, as it could lead the public to question the validity of the patent system altogether, and moreover might invite the “plague” of overasserting inequitable conduct so frequently warned about. An obfuscated standard for intent to deceive might be just right for balancing these concerns, because it provides a structural context that allows the Federal Circuit to maintain the threat of inequitable conduct – and keep the patent bar in line – but rarely find inequitable conduct. In effect, this structure encourages patentees to police themselves, and also creates a mechanism by which private parties are responsible for ensuring that patent applicants do not misbehave towards the government, i.e., the law sets up a system that mostly enforces itself.

The entire paper, which also includes additional observations, ideas, and recommendations, can be downloaded here, and we welcome all comments. In addition to responding below, comments can be sent to us directly at prm.icpaper@gmail.com. If the download link does not work for you, and you would like a copy of the paper, please email the above address and I will be happy to send you a PDF.

Part II of this series describes the methodology used in our working paper The Federal Circuit and Inequitable Conduct: An Empirical Analysis, and summarizes some of the key findings. You can download the entire paper here. In addition to responding below, comments can be sent either directly to us or to prm.icpaper@gmail.com.

MethodologyThe study uses the technique of “content analysis,” which permits researchers to systematically read and empirically analyze the text of judicial opinions. In broad terms, we first screened all Federal Circuit opinions that contained the term “inequitable conduct” to identify cases that analyzed the issue. We read all of these cases, coding pertinent information from each independent analysis of inequitable conduct.1 Overall, we coded information from 361 inequitable conduct analyses between the years 1983 and 2010. The coded information constitutes the empirical data, and the paper reports these data using a variety of statistical presentations and arguments.

ResultsWe first examined patent applicants’ success before the Federal Circuit as opposed to lower tribunals. Our analysis reveals that patentees are quite likely to succeed before the Federal Circuit, winning 76% of the time, a rate of success higher than that observed in the lower tribunal judgments the court is analyzing. Overall, the Federal Circuit affirms lower tribunal findings of no inequitable conduct 91% of the time, but affirms findings of inequitable conduct only 45% of the time, as illustrated by the below graphs. This suggests to us that the Federal Circuit is applying a stricter standard than in the lower tribunal opinions it reviews.

We next looked at the analytical structure of the inequitable conduct doctrine, which consists of three components: a materiality inquiry, an intent to deceive inquiry, and a discretionary judicial balancing of materiality and intent undertaken with a view toward deciding whether a patent applicant acted inequitably toward the public.

Examining the data in this light revealed two key findings. First, when the Federal Circuit gives a single reason for patentee success, that reason is nearly two and a half times more likely to be lack of intent to deceive than it is to be lack of materiality. Second, balancing is expressly discussed only 8% of the time and forms the basis for a reversal only 2% of the time. We think this means that the balancing inquiry does not play much of a substantive role in Federal Circuit inequitable conduct jurisprudence. To be clear, while it looks like lower tribunals need to engage in this step of the analysis, the Federal Circuit does not seem to have any jurisprudence that guides or constrains how lower tribunals actually apply this step. Instead, balancing at the Federal Circuit looks like a formality, such as checking a box or touching a base, as opposed to a meaningful guide to determining whether a patent applicant engaged in equitable conduct.

* * *

1In other words, if a case involved a claim that four patents were procured by inequitable conduct and the court’s analysis addressed all of the patents in a single textual analysis or rationale, then a single record entry was made in the dataset. By contrast, if the court used one textual analysis or rationale to find, perhaps, that one of the patents was procured inequitably, and then used a single textual analysis or rationale to find that the other three were not, then two record entries were made in the dataset.

Professor Lee Petherbridge, Ali Mojibi and myself are circulating a draft of our paper Inequitable Conduct and the Federal Circuit: An Empirical Analysis for comment. The underlying study examines the content of the entire body of Federal Circuit inequitable conduct jurisprudence, and the paper offers several interpretations of the reported data.

Among the most interesting are: that the Federal Circuit seems to apply a stricter standard for inequitable conduct than a substantial number of the tribunals it reviews; that the Federal Circuit’s inequitable conduct standard is applied primarily through the intent to deceive component of the analysis; and that while the apparent lack of clarity in the inequitable conduct standard may be a result of judicial variation on the court, it may also represent a preference by the Federal Circuit to effect a jurisprudential design, the purpose of which is to encourage good faith behavior on the part of patent applicants while only rarely finding inequitable conduct.

The abstract reads as follows:

Inequitable conduct is unique judicially created doctrine designed to punish patent applicants who behave inequitably toward the public in the course of patent acquisition. Its name alone strikes fear into the hearts of patent prosecutors, and justly so – for when successfully asserted, inequitable conduct can have devastating consequences that reach far beyond a patentee’s case. The need for a systematic empirical study of inequitable conduct jurisprudence has become especially pressing now that the Federal Circuit is reviewing inequitable conduct en banc – in terms so broad as to be unprecedented in the history of the doctrine. This Article reports such a study.

The study reported here provides evidence, inter alia, that the Federal Circuit applies an inequitable conduct standard stricter than that applied by a substantial number of the tribunals it reviews. The Federal Circuit’s stricter standard manifests primarily through the intent to deceive component of inequitable conduct doctrine. For all intents and purposes the Federal Circuit has no substantive jurisprudence around the balancing component, and the materiality component is comparatively less impactful then intent to deceive. The court appears to have trouble communicating its stricter standard to lower tribunals. We offer some explanations for why this might be so, and offer some modest suggestions that might advance inequitable conduct doctrine.

The complete Article can be downloaded here. As this is a work in progress, we are particularly interested in any comments, including alternate explanations for the results we discuss. In addition to responding below, comments can be sent to us directly or to prm.icpaper@gmail.com.

Raymond Stauffer brought an action against Brooks Brothers claiming that bow ties sold by the defendant were falsely marked with patents that expired in 1954 and 1955. Stauffer is a patent attorney who purchased some of the marked bow ties. The district court granted Brooks Brothers' motion to dismiss for lack of standing, and subsequently denied the United States' motion to intervene. Stauffer and the United States appealed.

Section 292 states:

(a) . . .Whoever marks upon, or affixes to . . . any unpatented article, the word “patent” or any word or number importing that the same is patented, for the purpose of deceiving the public. . .Shall be fined not more than $500 for every such offense.(b) Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.

(emphasis added). This type of language is called a "qui tam" provision, by which the government essentially asigns its rights to a private party (the qui tam "relator"). Because the relator is standing in the place of the United States, he or she must prove that the government, as opposed to the relator, satisfies the requirements for standing. Central to this case was the district court's determination that Stauffer failed to sufficiently allege that the United States suffered an injury in fact from Brooks Brothers' alleged false marking.

On appeal, the Federal Circuit concluded that the district court had erred on this point:

Congress has, by enacting section 292, defined an injury in fact to the United States. In other words, a violation of that statute inherently constitutes an injury to the United States. In passing the statute prohibiting deceptive patent mismarking, Congress determined that such conduct is harmful and should be prohibited. The parties have not cited any case in which the government has been denied standing to enforce its own law. Because the government would have standing to enforce its own law, Stauffer, as the government’s assignee, also has standing to enforce section 292.

Slip Op. at 9.

The panel rejected Brooks Brothers' reliance on Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992), which denied plaintiffs standing under a citizen-suit provision, as relating only to suits against the government itself. It also rejected the argument that Stauffer's standing depends on whether the alleged injury is proprietary or sovereign, concluding that both types of injury are sufficient to confer standing on the government, and therefore on the relator.

With respect to the Government's request to intervene, the Federal Circuit determined that the district court erred in concluding that the government lacked an interest sufficient to intervene as a matter of right under Rule 24(a)(2). The panel stated that:

Contrary to Brooks Brothers’ position, the government has an interest in enforcement of its laws and in one half the fine that Stauffer claims, disposing of the action would “as a practical matter impair or impede the [gov-ernment’s] ability to protect its interest,” and Stauffer may not adequately represent that interest….As an initial matter, Brooks Brothers does not contest the government’s assertion that Stauffer does not adequately represent the United States’ interest in this case.

Furthermore, the government would not be able to recover a fine from Brooks Brothers if Stauffer loses, as res judicata would attach to claims against Brooks Brothers for the particular markings at issue….Thus, even though, as the district court noted, “the issue of the government’s ability to bring an action pursuant to section 292” in general was not presented,[] the United States’ ability to protect its interest in this particular case would be impaired by disposing of this action without the government’s intervention. We there-ore reverse the district court’s decision denying the government’s motion to intervene.

Slip Op. at 15-16 (internal citations omitted).

Note: The Federal Circuit expressly declined to address several issues, including the constitutionality of Section 292(b) (an issue that was raised by amicus Ciba Vision Corporation), whether section 292 addresses a proprietary or a sovereign injury, or both, and whether Stauffers alleged injuries to himself, or his asserted injuries to competition, give him standing. In addition, in its remand the panel explicitly instructed the district court to consider Brooks Brothers' motion to dismiss pursuant to Rule 12(b)(6), which argued that the complaint fails to allege an intent to deceive the public with sufficient specificity.

Adams holds patent number 5,372,252, which covers an extended release formulation containing guaifenesin (an expectorant used to thin, loosen, and help expel mucus that causes congestion). Perigo sought FDA approval for a generic version of Adams' product, Mucinex®. After construing the claims, the district court granted summary judgment of noninfringement. Adams appealed that decision.

The claim terms in dispute related to pharmacokinetic parameters. These parameters are used to characterize the rate and extent of absorption of the active pharmaceutical ingredient ("API"). The primary term at issue, Cmax, indicates the maximum concentration of the API following dosing.

"Equivalent Cmax"The parties' main dispute was over the meaning of the term "equivalent" in the context of "provides a Cmax in a human subject equivalent to the Cmax obtained when the first of three doses of a standard immediate release formulation having one third the amount of guaifenesin is dosed." For purposes of FDA approval, a formulation is considered to be bioequivalent if, among other things, its Cmax is within 80% to 125% of the value with which it is being compared at a 90% confidence interval. The district court agreed with Perrigo that "equivalent" should be construed to mean equivalent under the FDA bioequivalence guidelines.

On appeal, Adams challenged the requirement of a 90% confidence interval, arguing that it makes sense when seeking FDA approval, but not when proving infringement.

The Federal Circuit agreed with Adams. In doing so, it rejected Perrigo's argument that the inventors had expressly defined "equivalent" as te FDA's bioequivalence guidelines. Rather, the court construed Adams' reference to the FDA guidelines as referring specifically to the 80-125% range, not to the requirement of a 90% confidence interval. According to the court:

Requiring a 90% confidence interval would inappropriately raise the bar for establishing infringement. Adams must show that it is more likely than not that Perrigo's ANDA product will have a Cmax within the 980-125% range. Adams is not required to show that Perrigo's product will meet this requirement 9 times out of 10.

Slip Op. at 8.

Comment: This interpretation opens up a box of statistical worms, and I suspect that down the line the court may regret its venture into probability theory. For the time being, however, it gives parties useful language to quote when attempting to prove infringement (and perhaps invalidity) via clinical results.

A ≈ B ≈ C therefore A ≈ CAdams also appealed the district court's ruling that it impermissibly compared the accused product to Mucinex. Adams' argument was that because the accused product was bioequivalent to Mucinex, and Mucinex was bioequivalent to a standard immediate release ("IR") product, then the accused product had a Cmax equivalent to the IR product.

The Federal Circuit agreed that, under the circumstances of this case, Adams' argument was sufficient to preclude summary judgment of noninfringement. The court cautioned, however, that "[i]f Adams had relied on the mere fact of bioequivalence of the two sets of products (and no PK data or Cmax values, that would not be enough to survive summary judgment." Slip Op. at 11. Here, however, Adams presented actual PK data and Cmax values, which a fact-finder could look at when assessing equivalence between the accused product and an IR product.

"Bioavailable"The court also addressed the meaning of the term "bioavailable" in the context of the '252 patent. The dispute hinged on whether the phrase "fully bioavailable in the subject's stomach" meant "both release and availability in the stomach for absorption, wherever that absorption might occur."

Perrigo argued that because "bioavailable" is commonly understood to mean absorption, thus requiring the guaifenesin to be absorbed in the stomach. Because guaifenesin is primarily absorbed in the small intestine, this construction would preclude a finding of infringement.

The court rejected the proposed construction as inconsistent with the specification: "Although the specification never expressly defines bioavailable, it uses the term when describing the availability of the drug for absorption, not the actual absorption." Slip Op. at 14. The court further noted that Perrigo's construction would exclude the preferred embodiment, which "is rarely, if ever, correct and would require highly persuasive evidentiary support."

Doctrine of EquivalentsFinally, Adams argued that the district court erroneously precluded it from relying on the doctrine of equivalents with respect to a dependant claim requiring that the total amount of guaifenesin released in to the patient be at least 3500 hr*ng/mL. The panel concluded that the use of a numerical limit did not preclude Adams from arguing that an amount of 3494.38 hr*ng/mL was equivalent to 3500 hr*ng/mL.

Although the court ultimately reversed the determination of inequitable conduct based on a lack of intent, its discussion of materiality is significant because the misrepresentation at issue occurred in the patent itself, in the form of statements about a prior art reference. Prosecutors may want to take special note of this opinion in crafting their Background of the Invention sections.

Ring Plus is the assignee of Patent No. 7,006,608 (the '608 patent), which relates to a software based algorithm and method for generating and delivering messages over a phone line that replace or overlay a ring-back signal.

After granting summary judgment of noninfringement, the district court held a bench trial on the unenforceability of the '608 patent. Following the bench trial, the district court concluded that the '608 patent was unenforceable due to inequitable conduct. Ring Plus appealed both determinations, along with the denial of its motion to disqualify Cingular's counsel.

Inequitable conduct: Materiality but no IntentThe district court's inequitable conduct determination was based on two alleged misrepresentations concerning the substance of two prior art references, Strietzel and Sleevi. The district court found that the first misrepresentation was in the Background of the Invention section of the '608 patent, which asserted that both references proposed hardware based systems but no software to operate those systems. Contrary to this assertion, the district court found, one of skill in the art would have understood the references to disclose software-based algorithms.1

The panel agreed that this was a material misrepresentation. Although neither reference explicitly disclosed software, the panel could not say that the district court clearly erred in finding that a person of ordinary skill in the art would have understood the references to disclose software-based algorithms.

In arriving at the conclusion that the statement about the contents of the prior art constituted a misrepresentation, the panel rejected the contention that it was merely attorney argument. The court did not address this issue in any depth, merely stating that because the statement was a misrepresentation, it "was outside the boundas of permissible attorney argument." Slip Op. at 9.

Comment: I am a troubled by the court's cursory statement on this point because of the ambiguity it creates. These types of sweeping assertions, made without addressing the substance of the argument or citing relevant authorities, are the kinds of things that are likely to tie attorneys and judges in knots. Indeed, the court's quotation from Rothman is particularly perplexing, as Rothman reached the opposite conclusion on similar facts. At a minimum, one would expect the court to explain why Rothman does not apply.

Ultimately, however, the panel concluded that Cingular had failed to present clear and convincing evidence of intent to deceive. In arriving at this conclusion the court noted that the references were ambiguous as to operating software, and the prosecuting attorney's testimony gave rise to the inference that the applicants believed that the two references did not disclose software for operating a telephone system. Because this inference was as reasonable as the district court's inference of deceptive intent, the district erred in its finding of deceptive intent.

Other holdingsThe panel also addressed Ring Plus's challenge to the district court's construction of two claim terms, which formed the basis of the noninfringement ruling. The court affirmed the district court's construction, relating to the sequence of steps in the '608 patent. In addition, the court rejected Ring Plus's argument that Cingular's counsel should have been disqualified for ex parte contact with a Ring Plus director and officer. The court concluded that there was no evidence of impropriety under Fifth Circuit law.

1The district court also found that the applicants made a misrepresentation about these references during prosecution; the panel concluded that this statement was not a misrepresentation.

Double-patenting issues arise when two commonly owned applications cover the same or similar inventions. The issues in this appeal revolved around an earlier patent claiming a composition of matter and describing a method for using that composition, and a later patent claiming that method of use.

Both of the patents in this case, Patent No. 4,808,614 (the '614 patent) and Patent No. 5,464,826 (the '826 patent) relate to gemcitabine, the active ingredient of Lilly's Gemzar® product. The '614 patent claims both gemcitabine itself, as well as a method of using it to treat viral infections. In addition, the '614 patent's specification discloses using gemcitabine to treat cancer. The '826 patent claims a method of treating cancer comprising administering a therapeutically effective amount of gemcitabine. The difference was important: the '614 patent expired on May 15, 2010, while the '826 patent does not expire until November 7, 2012.

Note: The applications leading to both the '614 and '826 patents were filed on the same day, December 4, 1984. The '614 was a continuation-in-part of application No. 473,883 ("the '883 application"), which did not disclose using gemcitabine to treat cancer. That information was added as part of the continuation-in-part.

After filing an Abbreviated New Drug Application ("ANDA") for a generic version of Gemzar®, Sun Pharmaceuticals, sought a declaratory ruling that the '826 patent was invalid and not infringed. Lilly counterclaimed for infringement of the '826 and '614 patents. The '614 patent was not at issue in this appeal.

Obviousness-type double patenting appliesApplicants are barred from obtaining multiple patents covering the same invention by the doctrine of double patenting. There are two types of double patenting: statutory double patenting, which prohibits a later patent from covering the identical invention, and obviousness-type double patenting, which prevents a later patent from covering a slight variation of an earlier patented invention.

On appeal, the panel agreed with the district court and Sun that the latter type of double patenting occurred here, thus invalidating the asserted claims of the '826. The basis for the court's decision were two prior opinions, Geneva v. GlaxoSmithKline, 349 F.3d 1373, and Pfizer v. Teva, 518 F.3d 1353. In Geneva, the earlier patent claimed a compound and the specification disclosed its effectiveness for inhibiting beta-lactamase. The later patent claimed a method of using the compound to affect beta-lactamase inhibition. Similarly, in Pfizer, the earlier patent claimed several compounds and the specification disclosed their use in treating inflamation; the later patent claimed a method of using these compounds for treating inflammation. In both cases, the court ruled that the claims were not "patentably distinct," and thus the latter claims were invalid for obviousness-type double patenting.

While Lilly argued that Geneva and Pfizer did not apply because "the specification of the earlier patent disclosed a single use for the claimed compound, which was an essential part of the patented invention and thus necessary to patentability," Slip Op. at 8, the court rejected that argument for two reasons. First, the court disagreed that the specification in Pfizer disclosed more than one utility for the claimed compound. In addition, the court read the rule of Pfizer as simply that "obviousness-type double patenting encompasses any use for a compound that is disclosed in the specification of an earlier patent claiming the compound and is later claimed as a method of using that compound. Pfizer never implies that its reasoning depends in any way on the number of uses disclosed in the specification of the earlier patent." Slip Op. at 10.

The court also rejected Lilly's argument that the specification of an earlier application should have been consulted, as opposed to the specification of the '614 patent. Drawing upon its claim construction precedent, the court noted that the specification is relevant to determining the coverage of the claims, which is at the heart of the obviousness-type double patenting analysis. The court further noted that "consulting the specification of the issued patent, as opposed to an earlier version, is consistent with the policy behind double patenting," which rests "on the fact that a patent has been issued and later issuances of a second patent will continue protection, beyond the date of expiration of the first patent of the same invention or an obvious variation thereof." Slip Op. at 14-15.

During the summer, the Federal Circuit is a relatively quiet place. The judges often take their non-sitting months during this time, and the pace of opinions tends to drop. Thus, for the next few weeks, I'll mostly be posting summaries of cases that issued this past spring and early summer. The two cases discussed below deal with a relatively minor — but still important — issue in the pharmaceutical and medical device context: patent term extensions based on extensive regulatory review periods.

35 U.S.C. §156 allows a patentee to obtains a term extension if the patent covers a product that has been subject to a regulatory review period before it can be marketed or used. Pharmaceuticals and medical devices are subject to such a review period, and new drug products in particular often involve a lengthy application and testing process. The initial determination as to whether a patent term extension should be granted is made by the USPTO, in consultation with the FDA. That decision is subject to review or challenge in district court proceedings.

One of the key issues in determining whether a patent term extension is warranted for a drug is whether it is the first time regulatory approval has been granted for this particular drug product, a determination that turns on whether or not the "active ingredient" had previously been approved by the FDA. Ortho-McNeil and Photocure, both authored by Judge Newman and issued on the same day, provide an interesting contrast on this issue.

Ortho-McNeil v. LupinIn Ortho-McNeil, the extension issue arose in the context of an injunction entered against Lupin Pharmaceuticals prohibiting it from making, using, selling, etc. a drug product covered by U.S. Patent No. 5,053,407 (the '407 patent) during the extension period. In that case, the district court affirmed the PTO's determination that an enantiomer was a different drug product then its racemate. In doing so, the district court noted that the PTO's determination should be afforded great deference.

Note: Enantiomers are molecules that are mirror images of one another. Due to their different orientation, they have different properties. A racemate is a composition consisting of equal parts of the two enantiomers. The '407 patent covered a substantially purified form of one of the two enantiomers (levofloxacin) in the racemate ofloxacin. There was no dispute that levofloxacin was separately patentable from ofloxacin.

On appeal, the Federal Circuit agreed with the district court, concluding that there was no basis for challenging the established FDA and PTO practices of treating enantiomers as different drug productsand rejecting Lupin's legislative intent argument.

Photocure v. KaposPhotocure involved a contrary determination by the PTO: that the drug product at issue was not a different "active ingredient," and thus the patentee was not entitled to an extension. In Photocure, the product at issue ("MAL") was a methyl ester of a compound ("ALA") that had previously been approved for the same therapeutic use. While the FDA treated MAL as a new drug, requiring a full approval process, the PTO rejected the extension based on its conclusion that § 156(f)(2) does not mean the product approved by the FDA, but rather the "active moiety," which it concluded was the same in both MAL and ALA.

Both the district court and Federal Circuit disagreed. In rejecting the PTO's interpretation of 156(f)(2), the Federal Circuit reasoned that § 156 focuses on the product that is subject to approval by the FDA, not the underlying pharmacological mechanism. Furthermore, Skidmore and Chevron deference standards did not apply because the statute was not unambiguous and the PTO's interpretation was neither persuasive nor consistent.

Note: although not the primary focus of the opinon, the panel also concluded that the PTO was wrong even under its "active moiety" interpretation as the biological properties of ALA and MAL are indisputably different.

* * * *

In addition to the issues discussed above, the scope of the injunction in Ortho-McNeil is worth noting. Although the extension authorized by 35 U.S.C. § 156 covers the "selling" or "using" of the product covered by the patent, the district court enjoined Lupin from engaging in any of the traditional forms of direct infringement, including "making" or "importing." Despite the literal language of §156, the Federal Circuit affirmed the scope of this injunction because there are no non-pharmaceutical "uses" of the drug product, a point that Lupin apparently conceded. Although as a practical matter this distinction may be of little value, as pharmaceutical companies often have production facilities located outside the United States, it is something to consider when seeking or opposing litigation under § 156.

Early this week, I wrote about Leviton, former Chief Judge Michel's last opinion on inequitable conduct before leaving the bench. Advanced Magnetic Closures brings another perspective on the issue – this time in the form of a comment from the new Chief Judge about issuing inequitable conduct opinions while Therasense v. Becton, Dickinson is pending en banc.

In Advanced Magnetic Closures, the court reviewed a district court determination that U.S. Patent No. 5,572,773 is unenforceable due to inequitable conduct by the alleged inventor. The panel also reviewed the district court’s entry of attorney fees against both the patent holder (AMC) and its attorney.

Inequitable conduct: The focus of the inequitable conduct determination was on the district court’s finding that the alleged inventor falsely claimed to the PTO that he was the inventor of the claimed magnetic fastener when, in fact, he was not. Applying the Star Scientific standard, the panel concluded that the district court did not err by finding that “the single most reasonable inference able to be drawn from the evidence is that [the alleged inventor] intended to deceive the PTO.” Slip Op. at 19 (internal quotations omitted).

Attorney’s Fees: After concluding that the exceptional case determination was appropriate on the basis of both inequitable conduct and litigation misconduct (an issue that the appellant waived by failing to include it in its briefs), the court addressed the attorney sanctions entered against AMC’s attorney under 28 US.C. § 1927. Applying Second Circuit law, the Federal Circuit concluded that the district court abused its discretion by sanctioning the attorney. The court noted that attorney sanctions under 28 U.S.C. § 1927 require a finding of bad faith, as opposed to objective unreasonableness, and concluded that the district court’s single statement that the attorney “should have been aware” of the deficiency of AMC’s patent infringement claim was insufficient to rise to this level.

Chief Judge Rader’s Concurrence: The most notable aspect of the opinion comes at the end, in the form of the new Chief Judge’s concurrence. While Judge Rader agreed with the outcome of the appeal, he wrote separately to stress that “absent extreme facts such as those found in the present case, this court should refrain from resolving inequitable conduct cases until it addresses the issue en banc.” He also provided the following interesting comment regarding Therasense:

“In Therasense, this court has been asked to address the transformation of inequitable conduct from the rare exceptional cases of egregious fraud that results in the grant of a patent that would not otherwise issue to a rather automatic assertion in every infringement case. The exception has become the rule. Generally, I would hold inequitable conduct cases until after this court reexamines whether to put the doctrine back into the exception category.”

Although no Federal Circuit decisions involving inequitable conduct have issued since Advanced Magnetic Closures, only a short time has passed. It remains to be seen whether the Chief Judge’s proposed policy on inequitable conduct determinations will be followed for the coming months.

* * * *

For the sake of full disclosure, I note that I previously represented Abbott Laboratories in connection with the Therasense litigation. I no longer represent clients, including Abbott.

In most patent cases, companies are the ones sued as alleged infringers. But sometimes individuals—particularly corporate officers—are also named as defendants. While this often occurs when the company accused of infringing appears to be merely the officers’ alter ego, corporate officers can be liable for indirect infringement even when the corporate veil is not pierced.

In Wordtech, the patentholder (Wordtech) sued both a corporation (INSC) and the two principal employees of that corporation. A jury found the claims infringed both directly and indirectly by the corporation’s products, and awarded damages against all three defendants. The jury also returned a verdict of willful infringement of the asserted patents, and the trial judge trebled the jury’s damages award. The two employees appealed the verdict of liability entered against them, and all three defendants appealed the damages determination and district court’s denial of a motion for leave to amend their answer.

Individual Liability

Generally, the “corporate veil” shields officers from liability for tortious conduct occurring in the regular course of their employment, and the employees in Wordtech filed a motion for judgment as a matter of law (“JMOL”) based on this doctrine. The district court denied this motion, allowing the jury to find that the employees infringed the patents.

Individual Liability for Direct Infringement

On appeal, the Federal Circuit affirmed the denial of the motion for JMOL with respect to direct infringement because Wordtech presented substantial evidence during trial that the corporation was nonexistent under Nevada law and, even if it existed, the corporate veil should be pierced. However, the appellate court agreed with defendants that the lack of any instruction on corporate status constituted plain error, and remanded for further proceedings on personal liability for direct infringement.

Individual Liability for Indirect Infringement

The most interesting aspect of the opinion was the Federal Circuit’s ruling on the indirect infringement claims against the employees. Although the court addressed inducement and contributory infringement separately, it applied virtually identical reasoning to both.

The panel began by affirming the denial of the defendants’ Rule 50(a) and 50(b) motions based on the corporate veil theory, pointing out that “corporate officers who actively assist with their corporation’s infringement may be personally liable for inducing infringement regardless of whether the circumstances are such that a court should disregard the corporate entity and pierce the corporate veil.” Slip Op. at 12. It applied the same reasoning to contributory infringement, concluding that “a corporation does not shield officers from liability for personally participating in contributory infringement.” Slip Op. at 14. Under these rules, the court rejected the individual defendants’ corporate veil defense as irrelevant to issues of inducement and contributory infringement.

Nevertheless, the panel concluded that the employees were entitled to a new trial due to flawed jury instructions, which asked only whether the accused product induced or contributed to infringement. Because a product cannot possess the necessary mens rea elements of inducement or contributory infringement, and there were no jury instructions that might have mitigated the error, the court vacated the verdict of liability.[1]

Damages

Addressing the issue of excessive damages in the context of its review of a denial of a motion for a new trial, the panel considered the evidence supporting the jury’s damages finding, which was based on a reasonable royalty under a hypothetical negotiation theory. The panel reviewed the licenses Wordtech relied upon for the hypothetical negotiation and concluded that the verdict was not supported by the evidence and based solely on speculation and guesswork. This portion of the opinion is noteworthy for the court’s detailed discussion of the licenses and its rejection of them on an array of different grounds.

Denial of Motion to Amend

In a curious twist, the trial and subsequent appeal involved no substantive invalidity issues. This was due to defendants’ failure to raise an invalidity defense in their answer, apparently relying on the fact that a previous co-defendant school district had included the defense in its answer. After INSC and its two employees learned that the school district had settled with the patent holder, they moved to amend their answer to add invalidity defenses. The Federal Circuit declined to find that the district court abused its discretion in denying the motion, as it was filed months after the close of discovery despite the defendants’ prior knowledge of the invalidity defenses they intended to raise.

Notes:

Ultimately, the favorable result for the individual defendants turned not on the legal question of whether officers can be liable for patent infringement, but rather on flawed jury instructions. This suggests two lessons from this case: first, be aware of potential employee liability, especially for indirect infringement, and second, make sure your jury instructions accurately reflect the elements of the issues being presented to the jury.

Although the opinion describes the individual defendants as employees, the rules it applies refer to corporate officers. This may be reconciled by the fact that Wordtech presented evidence at trial supporting the conclusion that they were officers.See Slip Op. at 11. Nevertheless, this opinion arguably could be used to apply indirect infringement claims to employees, provided that the necessary mens rea elements are present.

[1] The panel also noted that Wordtech failed to identify proof of elements required for contributory infringement, including the existence of any direct infringement corresponding to the alleged contributory actions. With respect to inducement, although the opinion is silent on who the officers were inducing to infringe, the patentee’s brief indicates that its theory was that the officers induced the corporation’s direct infringement, similar to the circumstances in Power Lift, Inc. v. Lang Tools, Inc., 774 F.2d 478 (Fed. Cir. 1985).

About Jason: After spending several years in practice as a patent litigator, Jason Rantanen is now looking at law from the academic side and is currently a Visiting Scholar at UC Hastings. His recent research focuses on the concept of mens rea in patent law.